Tim Pawlenty: Don't raise the debt limit - reform entitlement spending

Perhaps you should try decaf.

I’ll be voting for Palin, the next President of the United States.

PALIN 2012

We take in about $2.2 trillion in tax revenue from all sources. This just covers our entitlement spending and debt servicing costs. Our total budget is $3.5 trillion. The remaining $1.3 trillion to operate the entire government, including DOD, is borrowed.

What was our budget in 2008?

$2.9 trillion

Say it loud FRiend.

This is a leader talking. He knows what needs to be done, is arguing the truth and knows the people will come to support him because people want to support the truth.

“To do anything else will mean we’ve bought the Obama deficits and have made them our own.”

Amen!

“We need a long term plan to cut spending, but it will not happen overnight.”

Why not?

At Obama’s spending rate we will reach the default limit for our debt in three years. At most Republicans’ spending rate we will do it in five.

How long is your long term?

To knowingly support either option while knowing the consequences is _ _ _ _ _ _?

Why not?

I thought my post was pretty clear as to why. The fact that our entitlement programs and debt servicing costs consume virtually all of our tax revenues means that we will have to make some very difficult choices. Those who advocate not raising our current debt limit seem to be living in a fantasy world.

What cuts would you make to balance the budget this year and next? FYI: We will be reaching our debt ceiling limit in three months or less.

Check out this video to give you a glimmer of what we are facing.

The fact that our entitlement programs and debt servicing costs consume virtually all of our tax revenues means that we will have to make some very difficult choices.

The choices will not be easier tomorrow. And they won't be easier after we raise the debt ceiling again, and yet again.

If we can't make the difficult choices today, why would we be able to make them tomorrow?

Well I'm glad you asked. :)

Current Federal Cash Flow

$0 Deficit Funding Levels

Our choices are fairly simple at this point. We can either balance it by September or as our publicly held debt rises from $9T to $14T we will default. Then we will have no SS, Medicare and a aircraft carrier going up and down each coast.

I'm sure you have the best of intentions but our debt and deficits are simply a matter of arithmetic. One doesn't have to put on a tin foil hat to look at it, just green eye shades. Once it is seen, it is simply a matter of will to deal with it.

How about we cut the scope of the government to put it back into it’s constitutional role in America?

Chopping and trimming at “entitlements” (I take it Pawlenty is referring to stealing Social Security and Medicare - benefits Americans and their employers paid into all their working lives) is not going to solve the problem of our massive government nor it’s out of control spending.

It would be nice if Pawlenty respected the constitution. Being a Rino, he’s never thought about it.

We are not going to make the difficult choices in the next three months, i.e., the reform of the entitlement programs. If you don't raise the debt limit, the country will go into default and we won't be able to fund the entire government including DOD.

You have to be realistic. Spending has to be cut and we can start doing that immediately, but taking down the government without a plan would be disastrous. The Reps should use the debt ceiling as leverage to start a long term deficit reduction plan.

We have 54 million on SS, 60 million on Medicaid, 47 million on Medicare, and 43 million on food stamps. Do you really believe that reforming these programs will be easy or that we can have a political consensus in a divided government? The Dems control the WH and the Senate. Some very painful decisions lie ahead for this country. There is no easy way out.

We have 54 million on SS, 60 million on Medicaid, 47 million on Medicare, and 43 million on food stamps.

Too many people think that taxpayers owes them a living. Dependency is a mental illness and many of our citizens (particularly seniors) have become morally weak and decadent.

All these welfare programs should be terminated and the sooner the better.

Are you able to compose a comment that would tell the reader what you believe about Pawlenty without trying to tear down Palin? Is Pawlenty that weak?

Our choices are fairly simple at this point. We can either balance it by September or as our publicly held debt rises from $9T to $14T we will default. Then we will have no SS, Medicare and a aircraft carrier going up and down each coast.

There is no way we can balance the budget by September. The draconian cuts you propose would never pass Congress. The budget deficit should be reduced on a long term glide path. We raise our debt ceiling to avoid default. There is nothing magic about $14 Trillion in publicly held debt. FYI: We must raise the total debt ceiling--not just the publicly held debt. Intragovernmental holdings [SS,Medicare, and other trust funds] are included in the current $14 trillion national debt.

I'm sure you have the best of intentions but our debt and deficits are simply a matter of arithmetic. One doesn't have to put on a tin foil hat to look at it, just green eye shades. Once it is seen, it is simply a matter of will to deal with it.

That is exactly my point. The idea that we can have entitlement reform in three months is a non-starter. Nor can you make the huge cuts in government operations that you propose. You not only have to deal with arithmetic, you must address the political landscape.

And if pigs had wings they could fly. Exactly how many politicians of any stripe are going to terminate all welfare programs?

First you’re getting the numbers wrong.

Our total debt is $14T. Our publicly held debt is $9T. The difference, $5T, is intra-governmental held debt and, as you correctly say, not important because we won’t pay our own debt. (As an economic aside, note that the people who charged the debt, our grandparents, can’t pay it to the people who need it, our parents. That’s a thinker.)

There IS something magical about the (publicly held) debt to GDP ratio. Bond holders typically refuse to lend when it gets around 100%. We don’t know when our bond holders will refuse to lend but the past is prologue. It will depend on the confidence they have in our ability to pay at that time. They will have no confidence when interest rates rise to the point that new debt cannot be paid without defaulting on old debt.

Our current debt to GDP ratio is $9T/$14T x 100% = 64%. Under Obama’s $1.4T annual deficit plan, we will add 10% per year, leaving us three years to default. Under the Republican’s $1.1T plan, we will add 8% per year, leaving us five years to default. This time to failure calculation assumes that our current historically low interest rates stay historically low. They won’t and and must go up exponentially, the closer we get to 100%.

Personally what I have learned in my life is to get from denial to acceptance as quickly as I can. Bargaining is the hardest step. To get past it, I do what I can do to be as certain as I need to be that there is a problem that needs to be solved. Then it’s just a matter of character.

As for politicians accepting this problem, Patrick Henry saw this situation coming. At the time the states were being asked to consolidate under one government to pay off the debts from the Revolutionary war. Patrick Henry looked at the proposed constitution, saw a fundamental problem with it and said,

“I say they may ruin you; for where, sir, is the responsibility? The yeas and nays will show you nothing, unless they be fools as well as knaves; for, after having wickedly trampled on the rights of the people, they would act like fools indeed, were they to publish and divulge their iniquity, when they have it equally in their power to suppress and conceal it.

Where is the responsibility—that leading principle in the British government? In that government, a punishment certain and inevitable is provided; but in this, there is no real, actual punishment for the grossest mal-administration. They may go without punishment, though they commit the most outrageous violation on our immunities.”

He was right, they are knaves but not fools. They will obscure the truth as much as they can. Why do you think they spend so much time pointing fingers at each other? The only reason they get away with that is because voters have forgotten that in our system of government, only the House is responsible for what the House allows. The House Republicans will have only the House Republicans to blame if/when we default.

Our total debt is $14T. Our publicly held debt is $9T. The difference, $5T, is intra-governmental held debt and, as you correctly say, not important because we won’t pay our own debt. (As an economic aside, note that the people who charged the debt, our grandparents, can’t pay it to the people who need it, our parents. That’s a thinker.)

I don't have the numbers wrong. Economists disagree about the importance of the Intragovernmental Holdings portion of the debt, but it is imnportant to understand that this debt is also interest bearing. And when SS goes into the red as it has this past year and this year and peramently in 2016, the non-market T-bills in the Trust Fund will have to be redeemed by the USG from the General Fund to pay benefits. The government must come up with real money by borrowing it or reducing spending elsewhere. The Intragovernmental Holdings represent an unfunded liability, which is why it is included in the total national debt.

There IS something magical about the (publicly held) debt to GDP ratio. Bond holders typically refuse to lend when it gets around 100%. We don’t know when our bond holders will refuse to lend but the past is prologue. It will depend on the confidence they have in our ability to pay at that time. They will have no confidence when interest rates rise to the point that new debt cannot be paid without defaulting on old debt.

There is not doubt that our bond ratings and interest rates to borrow will increase. Japan's debt is over 125% of GDP now. That is the danger we face with increasing our national debt, i.e., the debt servicing costs and rising interest rates. It is a downward spiral.

Our current debt to GDP ratio is $9T/$14T x 100% = 64%. Under Obama’s $1.4T annual deficit plan, we will add 10% per year, leaving us three years to default. Under the Republican’s $1.1T plan, we will add 8% per year, leaving us five years to default. This time to failure calculation assumes that our current historically low interest rates stay historically low. They won’t and and must go up exponentially, the closer we get to 100%.

What you seem to be missing is that Congress will have to raise the debt ceiling in three months not three years. The debt ceiling applies to our total debt including the publicly held debt and intragovernmental holdings. We can keep on raising the ceiling as we done for many years rather than default. That brings its own dangers, but as long as we keep printing money, we can pay our debts, albeit with a declining dollar.

He was right, they are knaves but not fools. They will obscure the truth as much as they can. Why do you think they spend so much time pointing fingers at each other? The only reason they get away with that is because voters have forgotten that in our system of government, only the House is responsible for what the House allows. The House Republicans will have only the House Republicans to blame if/when we default.

There is plenty of blame to go around including the American people who are uninformed and unengaged. Most would prefer to keep receiving government handouts without understanding that we can no longer afford to do so. The people don't want the politicians to treat them as adults nor do they want to feel the pain of the decisions that must be made.

By 2030, one in five residents in this country will be 65 or older, twice what it is now. The baby boomers are retiring at the rate of 10,000 a day and will continue to do so for the next 20 years. In 1950 there were 16 workers for every retiree; today it is 3.3; and by 2030 it will be just two. The welfare state has bankrupted us.

Okay, I think you’re asking good questions. The implications of the governmentally held debt are particularly vexing to figure out. To really understand it, one has to look at spreadsheets to figure out where the money goes in each and every year. It's actually much easier to do it now that even SS is runing a deficit.

I don't have the numbers wrong. Economists disagree about the importance of the Intragovernmental Holdings portion of the debt, but it is imnportant to understand that this debt is also interest bearing. And when SS goes into the red as it has this past year and this year and peramently in 2016, the non-market T-bills in the Trust Fund will have to be redeemed by the USG from the General Fund to pay benefits. The government must come up with real money by borrowing it or reducing spending elsewhere. The Intragovernmental Holdings represent an unfunded liability, which is why it is included in the total national debt.

You’re 100% right about that…. up to the point you said, "will have to be redeemed by the USG from the General Fund to pay benefits." We agree on that. Yet you make a logical leap to "The government must come up with real money by borrowing it or reducing spending elsewhere." A leap too far. As the publicly held debt increases, the amount of money the government must pay to make the minimum payments on that debt increases. You know that. You are confusing yourself by crossing two scenarios,

The total debt limit is not increased and increased SS payments are made by cuts to everything else.
The total debt limit is increased and SS is paid by increasing the publicly held debt because SS is now operating in the red.

Either way, the publicly held debt will increase until it reaches 100% of GDP when we will be forced to default. Today’s GDP is $14T which is our current debt limit.

That’s why economists don’t like intergovernmental holdings. Because the concept makes scenario A theoretically possible and yet we operate under scenario B.

Practically all that matters to bond buyers is our publicly held debt because "The government must come up with real money by borrowing it or reducing spending elsewhere." All that matters is cash flow. ( Current Federal Cashflow )

There is no doubt that our bond ratings and interest rates to borrow will increase. Japan's debt is over 125% of GDP now. That is the danger we face with increasing our national debt, i.e., the debt servicing costs and rising interest rates. It is a downward spiral.

Yes! Correct! It is a spiral but airplanes wouldn’t go into spirals if pilots knew exactly when they would go into spirals. What you are imagining is that we metaphysically know the maximum debt ratio AND all our bond buyers agree with us. They won’t. Some will bail when they think we can’t make interest rates of 4%, some when it is 6% and so on.

You are arguing that the hard limit is 125% or a bit higher. You don’t know that it is. What we do know is that it is around 100%. Sometimes its higher, sometimes it is lower. For Greece, even with the backing of the ECU, it was 115%. The exact point is dependent on circumstance. Just because YOU think it’s 125% doesn’t mean that other people think that’s the limit. Japan is the exception that proves the rule. It’s not even that good an exception. The truth is, we will default when OTHER people think we’ve reached the limit. Maybe you feel that every bondholder will think by your rules. Good luck with that. They don’t call them bond vigilantes because they follow rules other people think are reasonable.

What you seem to be missing is that Congress will have to raise the debt ceiling in three months not three years.

The Congress will raise it in three months to last how long? One year? Two? Five? Congress can raise it up to the point that the total government debt minus the intragovernmental holdings equals the publicly held debt equals 100% of GDP.

The debt ceiling applies to our total debt including the publicly held debt and intragovernmental holdings. We can keep on raising the ceiling as we done for many years rather than default.

No. No, no we cannot. Your "many years" is not my "many years". The total debt can be raised until the publicly held debt reaches 100% of GDP, give or take depending on bold holder opinions and unknown interest rates. At the Republican’s spending rate, we will reach a historically reasonable risk of forced default in just five years. Five years isn’t much to me.

That brings its own dangers, but as long as we keep printing money, we can pay our debts, albeit with a declining dollar.

Please be serious. If that’s the point off all this then…. I’m guessing you’re about 23 years old. Your parents should come find you and set you straight. There is no way you could understand most of what you wrote and not understand why trying to inflate our way out of a short-term held debt is a bad, bad idea.

There is plenty of blame to go around including the American people who are uninformed and unengaged. Most would prefer to keep receiving government handouts without understanding that we can no longer afford to do so. The people don't want the politicians to treat them as adults nor do they want to feel the pain of the decisions that must be made.

If that is true then it all doesn’t matter. What I think is true is that the American people, even the educated ones, don’t know how deep a hole we are in and how fast we are digging. If the House doesn’t hold the line on debt, the American people won’t know why debt is important until it is too late. That is why Paulenty’s point is so helpful. It forces the clarity we need to get our spending under control. Most Americans don’t understand there is a hard, literally killing limit to deficit spending. If they do find out after it happens, God help anyone within ten miles of the Capitol. It will mean and end to our way of life, end of our constitution, old people will die needlessly, etc. Decisions have consequences and sometimes are out of proportion to what we think is reasonable.

By 2030, one in five residents in this country will be 65 or older, twice what it is now. The baby boomers are retiring at the rate of 10,000 a day and will continue to do so for the next 20 years. In 1950 there were 16 workers for every retiree; today it is 3.3; and by 2030 it will be just two. The welfare state has bankrupted us.

True. Now is the time to deal with it as we are sure that our (publicly) held debt to GDP ratio is manageable. If we wait until it might not be, it will be too late. At that point other people, far more brutal people, get to decide what the consequences are. What makes sense to me is to have the retirement age increased each year to keep the percentage of people on SS what it is today.

Either way, the publicly held debt will increase until it reaches 100% of GDP when we will be forced to default. Today’s GDP is $14T which is our current debt limit.

Not true. There is no automatic default when the publicly held debt reaches 100% of GDP. There is no hard limit.

Please be serious. If that’s the point off all this then…. I’m guessing you’re about 23 years old. Your parents should come find you and set you straight. There is no way you could understand most of what you wrote and not understand why trying to inflate our way out of a short-term held debt is a bad, bad idea.

Tell that to Bernanke and his quantitative easing. The dollar is still the world's reserve currency. I am guessing you are about 15 years old.

The Congress will raise it in three months to last how long? One year? Two? Five? Congress can raise it up to the point that the total government debt minus the intragovernmental holdings equals the publicly held debt equals 100% of GDP.

Where do you come up with this nonsense about the imaginary point of when the publicly held debt equals 100% of GDP. Yes, bond ratings will decline and the cost of borrowing will go up, but there is no automatic default. The real problem is when debt servicing costs continue to eat up more and more of the federal budget that we can no longer operate our government. Then we are forced into default. Congress has been raising the debt limit for a long, long time.

What makes sense to me is to have the retirement age increased each year to keep the percentage of people on SS what it is today.

It makes more sense to means test it. SS is not our biggest problem. It can be solved relatively easy thru a combination of ways. I prefer privatizing it with a small defined benefit program. Raising the retirement age every year is simplistic and won't work for those blue collar workers who have been engaged in hard physical labor. Some slight increases in the retirement age, changes to the computation of benefits and COLA, and small increases in payroll taxes can keep the system solvent.

Medicare and Medicaid are by far our biggest problems and the most difficult to solve. These programs are bankrupting the nation.

You are missing the point: it’s “entitlements” that consume about 60% of the federal budget. Year after year after year. They are the legacy of FDR and LBJ.

The Framers never heard of either FDR or LBJ, so I’m not sure how the programs they started in the last century fit into the original intent of the Constitution limiting the powers of the federal government. I suspect the Framers would be appalled at what has come to be considered “provid[ing] for the ... general welfare.”

Congress got itself into a bind by making “entitlements” untouchable. That has to change. It cannot be sustained without driving the country’s economy over the cliff.

“Entitlements” include SS, Medicare, Medicaid, and all the welfare programs, food/shelter, etc. They have to be brought under control. And it’s about time someone came out and said so.

Virtually everything about the SS program is arbitrary: the limit on earned income that’s taxed for SS/Medicare, how much SS pays out, how one qualifies, the age when one can start to collect, how and when SS income can be taxed, and on and on.

I’ve read that the average SS recipient collects in 4.5 years what s/he paid into the program over his/her working years. How can that NOT be a Ponzi scheme? That could well be considered ‘stealing’ from our children and grandchildren. I’m not willing to do that.